ESG risk metrics in executive pay
Robust net zero strategies will require bolstering board-level expertise and oversight of climate risks and opportunities, as well as linking executive remuneration to the achievement of climate-related objectives. As part of its efforts to hold companies to account, BMO GAM (EMEA) will engage with companies across industries including oil and gas, mining, materials, electric utilities, transportation and automotive and financial institutions on how executive pay is linked to climate strategy.
Specifically, BMO GAM (EMEA) expects targets to be constructed to align executive incentives to the interests of long-term shareholders. It will advocate for the introduction of risk-related preconditions to bonus awards, ensuring inappropriate incentive payments are not awarded in the event a company’s financial strength or credit quality might deteriorate.
A spotlight on the chemicals industry
With climate change causing changes to the scale and impact of extreme weather events, BMO GAM (EMEA) will engage with companies with supply chains or operations in areas of high vulnerability, to improve their current risk assessment and mitigation efforts, with a focus on the chemicals industry. It will also seek to encourage chemicals companies towards a sustainable transition by reducing greenhouse gas emissions, minimising harmful effects on local communities, reducing plastic waste and investing in recycling technologies to “close the loop” on plastic waste through the adoption of a circular economy.
Protecting human rights within supply chains
Effective supply chain management practices are essential to ensuring the protection of human rights and in 2022 BMO GAM (EMEA) will engage with corporates on implementing human rights due diligence across supply chains, as part of efforts to protect human rights, and enhance business continuity and general supply chain management practices.
Furthermore, with an over-reliance on social audit firms to assess supplier compliance, BMO GAM’s Responsible Investment team will focus on ensuring audit quality, and for companies in apparel, retail and service sectors, on appropriately fulfilling their human rights and labour standards obligations.
BMO GAM (EMEA) has a 25-strong responsible investment team engaging with companies across sectors. In 2021, the team engaged with 940 companies across 49 geographies resulting in 388 milestones (outcomes as a result of direct engagement).
Now part of Columbia Threadneedle Investments, the combined group will continue to leverage BMO GAM (EMEA)’s leading responsible investment expertise, as it seeks to drive real world change, deliver client outcomes and help achieve a sustainable future, through active management.
